Lubbock Chamber of Commerce: Working for Business. Believing in Lubbock. Every Day.

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1 Lubbock Chamber of Commerce: Working for Business. Believing in Lubbock. Every Day. Eddie McBride, President Texas Association of County Auditors Healthcare General Information, New Legislation and Impact October 13, 2010

2 Chamber Employer Health Care Plan Formed in 2006 with COVHS, UMCHS and FirstCare Health Plans Two private purchase cooperatives, 2-50 employees (small group) and 51+ employees (large group) 950 groups, 9,000 lives Recent Sept. 1 renewal saw 98% renewals and expectations for new member enrollment

3 Patient Protection and Affordable Care Act (PPACA) (and the reconciliation Fixer bill, the Health Care and Education Reconciliation Act ) General Information

4 2010 Patient Protection and Affordable Care Act (PPACA) Timelines Insurance Reforms Small Business Health Tax Credit False Claims Act Early Retirees Taxation Medicare Cuts

5 2011 Patient Protection and Affordable Care Act (PPACA) Timelines (cont.) W-2 Reporting HAS & FSA Limits and HAS Penalty Brand Name Drug Tax Federally Subsidized Long Term Care Physician Ownership Referral Market Based and Productivity Adjustments

6 Patient Protection and Affordable Care Act (PPACA) Timelines (cont.) Reporting Medicare Advantage (MA) 2013 Elimination of Deduction for Part D Subsidy Fewer Deductible Medical Expense Medicare Payroll Taxes FSA Limits Medical Device Tax Comparative Effectiveness Tax

7 2014 Patient Protection and Affordable Care Act (PPACA) Timelines (cont.) Health Insurance Exchanges Benefits Package Individual Mandate Employer Mandate Reforms to Group Health Plans Annual Fee on Health Insurance Providers

8 Patient Protection and Affordable Care Act (PPACA) Timelines (cont.) 2015 IPAB-Independent Payment Advisory Board 2016 Interstate Health Choice Compacts 2017 Large Employers in Exchange 2018 Cadillac Tax 2019/2020 Indexing of Premium Subsidies Indexing of the Cadillac Tax Thresholds

9 Patient Protection and Affordable Care Act (PPACA) New Legislation (underway as we speak) 1099 Reporting (We certainly hope repeal happens, if not ) Businesses will have to complete 1099 forms for every business-to-business transaction of $600 or more a tremendous paperwork burden for small business

10 Health Insurance Exchanges Until 2014 the PPACA bill collects a great deal of taxes but most of the insurance market reforms are not implemented American Health Benefit Exchanges provide that each state may elect to establish an Exchange to: 1. Facilitate the purchase of qualified health plans (QHP) 2. Provide for the establishment Small Business Health Options Program (SHOP) 3. Meet other requirements in the Act

11 Patient Protection and Affordable Care Act (PPACA) Impact Important Choices for Businesses Offering vs. Non Offering Plan Cost Considerations Other Benefit Considerations

12 To Offer, or Not to Offer? Small Business Tax Credits 25 or fewer employees, avg salary=$50,000 or less (or 50 halftime employees); must cover at least 50% of premium Will last 2 years past the creation of Exchanges (the credit is 35% before 2014 & 50% for two years after) CAVEAT: no transition after the two year cutoff If between 25 & 50 employees (or half-time), not eligible for subsidies but won t be fined for failing to offer health insurance BUT if DO offer a plan, it will need to meet essential benefit & actuarial standards, or employees will still be subject to the individual mandate penalty

13 To Offer, or Not to Offer? Essential Plan Requirements? To be exempt from individual & employer penalty, plan must meet approx 60% actuarial value & cover all essential benefits Essential benefits will be promulgated by HHS Secretary prior to 2014

14 To Offer, or Not to Offer? Plan Costs vs. Penalty Costs: >50 employees & not offering coverage? No fines if ALL employees incomes >400% of the Federal Poverty Level (FPL). If ANY 1 <400% of FPL, fine = $2,000 X total employees minus % FPL individual=$43,420 & family of 4=$88,200 no. of employees = all working 30+ hrs/wk PLUS no. of FTE workers (total hrs/wk of all the part-time, divided by 30 as many times as possible).

15 To Offer, or Not to Offer? Vouchers & Affordability Credits for Offering Firms: Employers with >50 employees If employee s share =8 to 9.8% of income, required to offer employee a voucher equal to employer s expected contribution, to purchase health insurance in an Exchange If employee s share >9.8% of income & if income <400% of FPL, qualifies for Exchange subsidy, incurring a $3,000 fine for employer If enough employees have low enough incomes & get Exchange credits, employer could be fined as much as if offering no insurance & paying the free-rider penalty

16 To Offer, or Not to Offer? Employees Subsidy Eligibility Quirks: Employees who do not meet the 2 specific affordability requirements & are offered a qualified plan are not eligible for Exchange credits Offering an employer plan may be disadvantageous to some employees, who would be eligible for more generous subsidies if they were not offered a qualified plan through their employer In many cases the $2,000/employee fine could be much less than avg employer contribution to employees premiums Key Decision: whether or not to offer plans against possible savings the employer could obtain by opting for penalties, possible fines that low-income employees could generate, & possible subsidies that employees could receive if there is no plan offered

17 Managing Costs & Avoiding Penalties Purchasing Traditional Insurance: Employers purchasing traditional insurance will need to verify that plan is qualified benefit by Oct Plans must: meet new lifetime/annual limits, rescissions, & excess waiting periods requirements allow individuals up to age 26 to be listed as dependents first-dollar coverage of prevention with no cost-sharing will be mandated for everything selected by the U.S. Preventative Services Task Force 2014: tax specifically on fully-insured products, which could result in increased costs associated with these plans

18 Managing Costs & Avoiding Penalties Self-Insuring Alternative Shields employers from both state coverage mandates & new health insurance tax. BUT entails two key new risks: employer responsible for ensuring plan meets all new requirements (as well as new outside requirements under the Genetic Information Nondisclosure Act, the Mental Health Parity Act, & others), if plan s costs per beneficiary exceed certain amounts after 2017, plan sponsor will be fined by the Cadillac tax. Plans will need to report costs & may be forced to rebate money to beneficiaries if plan s admin costs >15% starting in 2011 depending on definitions developed for admin costs, could be challenging for plans trying to innovate cost-containment strategies

19 Managing Costs & Avoiding Penalties Sending Employees to the Exchange: Small employers will be eligible at the outset States may allow large employers to participate starting in 2017 May allow a defined contribution from employers, provided the contribution was significant enough to avoid responsibility penalties.

20 Offering Other Health-Related Benefits Long-Term Care: 2011: employers will be permitted to automatically enroll employees into the new CLASS program, which will on average every month deduct between $146 & $240 (conflicting estimates) from employee s pay checks If an enrollee (after 5 yr vesting) is in need they may receive around $75 per day from the program Employees will need to be given a notice that they can affirmatively opt-out to avoid auto-enrollment

21 Offering Other Health-Related Benefits Retiree Prescription Drugs: Employers who offer Part D prescription drug plans to retired employees currently receive 28% subsidy from Medicare, which has been excluded from taxation 2013: exclusion will be removed, so net subsidy from Medicare will be in effect reduced (meaning the overall costs to employers to provide Part D programs will be increased) Employers currently offering these benefits or considering beginning to offer these benefits should take these new costs into account If a business ceases offering a Part D prescription drug plan, retirees will still be eligible to use the Part D program on their own

22 Offering Other Health-Related Benefits Compensation: Effective this Summer, individuals with preexisting conditions will have access to high-risk pools. 2014: creation of Exchanges& all plans generally subject to guaranteed issue & community rating in other words, employees may enroll in an Exchange plan at any time & they will not be turned away or charged higher prices due to periods of being uninsured individual responsibility requirement, which also kicks in starting 2014, will max at the higher of $695 or 2.5% of an individual s salary due to the removal of risk in having uninsured periods, & low penalty for failing to obtain insurance, many employees may prefer compensation through income rather than through health benefits

23 Offering Other Health-Related Benefits Consumer-Directed Account Options: 2011changes to Health Savings Accounts (HSAs), Flexible Spending Arrangements (FSAs), & high deductible health plans (HDHPs) 2011: HSA & FSA funds will no longer be permitted to purchase certain items, including most OTC meds without Rx 2013: FSA contributions limited to $2,500 per year Late 2010: HDHPs subject to new rules re 100% coverage of preventative services, no lifetime & annual benefits, & no rescissions new out of pocket limits could limit usefulness of HDHPs to employers by distancing enrollees from actual costs Effect: HDHPs more expensive, & accounts flexible for consumers so some employees may be less interested in using these rather than traditional PPO plans.

24 Finally. Is this thing for real, or am I still having a nightmare? Multi-state Lawsuit New Congress Rule-making The Mayan Calendar

25 Questions? Eddie McBride, President Lubbock Chamber of Commerce